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Intercontinental Hotels to pay first special dividend unaided by major disposal

Submitted by members on Thu, 02/23/2017 - 05:46

IHG chief Richard Solomons outside the group's London Park Lane hotel

By Bradley Gerrard

InterContinental Hotels Group is to pay its first special dividend unaided by a major disposal as the company continues to prove to investors just how cash generative it can be.

The global hotelier, announcing full year results for the 12 months to December showing a 9.5pc increase in underlying profit, is to make a special payout of $400m (£322m) for 2016.

Once paid, the dividend will mean IHG has returned $12.8bn to shareholders since becoming a standalone entity from former parent Six Continents in 2003.

Less than half that figure, some $5bn, has however come from money generated by the day-to-day running of the business.

In 2015, the company paid a $1.5bn special dividend, but this was heavily powered by the $928m sale of InterContinental Hong Kong and the €330m sale of InterContinental Paris - Le Grand.

Those sales concluded the group’s asset disposal programme, which has helped shift the business model to one where its hotels are run on a franchise basis, with companies running individual hotels paying a fee to IHG. For the year to December 2016, 95pc of profits came from fees.

The special payment for 2016 provides an indication of how much cash the company generates, especially as it came alongside an 11pc rise in the ordinary dividend to 94¢ a share.

The lobby of the InterContinental Amstel Amsterdam hotel

Conditions are becoming more challenging in the hotel industry after several successive years of growth though. The company’s global revenue per available room - a key industry metric known as RevPAR - grew 1.8pc in 2016 - less than half the 4.4pc rate of growth seen in 2015.

Chief executive Richard Solomons said it was “decent growth in a low-growth market” and highlighted GDP growth as a “big driver of hotel revenue”.

The group’s RevPAR in the US, a key market for the group, continued to be weighed down by its exposure to oil producing areas.

IHG generated revenues of $1.715bn in 2016, down from 4.9pc on an absolute basis. But on an underlying basis, stripping out asset sales, managed leases and other items, revenues rose 4.6pc to $1.58bn, while operating profit rose 9.5pc to $702m.

The FTSE 100 constituent will pay its final and special dividends on May 22, based on the register as at May 5.